Big Data Stocks: Growth + Valuation Examined

As noted in an earlier post, revenue growth remains an all too scarce commodity. Given that there’s not much room for rational multiple expansion, that puts a spotlight on finding market niches that are bucking the anemic revenue trend. That is, if you’re keen for growth via revenue expansion rather than growth through cost-cutting and share buybacks that inflate per-share data.

As mentioned in that earlier post, some health care stocks are delivering strong revenue growth. And so, too, is technology. According to FactSet, the tech sector’s 4.9% revenue growth in the fourth quarter was second only to health care. Internet Software and Services grew at a 20% rate.

To be sure, the Tech Sector has been expected to re-exert itself for the past few years, but performance has lagged as corporate IT budgets didn’t expand as much as anticipated, and consumer wallets were not opened as wide as expected.

But as the stronger revenue attests, that may be, finally, shifting. And with it, the sector’s stock performance. Year to date, tech stocks, as represented by the iShares US Technology ETF (IYW) are well ahead of the SPDR S&P 500 ETF (SPY), as seen in a stock chart: